Organisations looking to expand through acquisition continue to prioritise financial modelling and legal diligence at the expense of cultural integration when looking at new deals, according to research from US consulting firm RGP.
The report – The Human Value Gap in M&A – said this remains a “critical blind spot” in modern M&A transactions, with businesses consistently underinvesting in the human systems that most determine deal success.
While 81% of respondents say intangible assets such as culture, talent and knowledge are critical to deal success, only 18% believe their organisations are effective at protecting them. Highlighting why this is an issue, 74% of respondents said they had seen moderate to high leadership or critical talent turnover within 12 months of an acquisition being made.
The report also found that most organisations measure M&A success within two to three years, while true cultural and organisational integration often takes five to seven years.
A chief human resources officer at a multinational pharma company said these “longer-term, culture-led success factors are often under-measured”, adding: “Indicators like employee engagement, leadership retention, internal mobility and trust in new leadership can be leading signals of whether the integration will truly deliver sustained value or quietly erode it over time.”
More than half of respondents (58%) said they monitor leadership and key talent turnover as an early warning sign for value erosion, with 58% also saying they view synergy realisation delays as a value erosion indicator. However, most organisations still focus mainly on financial metrics as a measure of deal success, which means they may believe an acquisition is performing well if early financial performance is positive, potentially overlooking signs that deeper value foundations are weakening, RGP noted the report.
Daniel Boyer, senior vice president and head of M&A at RGP, said: “For decades, M&A has been managed as a financial exercise, and the human capital aspects of M&A have been deprioritised. What this research validates is that deal value is rarely lost in the spreadsheet; it’s lost in the organisation. Leadership alignment, talent retention and cultural integration are the true drivers of sustained performance.”
The report was based on a survey of more than 100 chief financial officers and chief human resources officers at companies with at least $500m in annual revenue across North America.
A report published in March by consulting firm BRG found that diligence gaps are increasingly fuelling post-deal M&A disputes.
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